The Effect of Public Science on Corporate R&D

Ashish Arora (), Sharon Belenzon, Larisa C. Cioaca, Lia Sheer and Hansen Zhang

No 31899, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the relationships between corporate R&D and three components of public science: knowledge, human capital, and invention. We identify the relationships through firm-specific exposure to changes in federal agency R\&D budgets that are driven by the political composition of congressional appropriations subcommittees. Our results indicate that R&D by established firms, which account for more than three-quarters of business R&D, is affected by scientific knowledge produced by universities only when the latter is embodied in inventions or PhD scientists. Human capital trained by universities fosters innovation in firms. However, inventions from universities and public research institutes substitute for corporate inventions and reduce the demand for internal research by corporations, perhaps reflecting downstream competition from startups that commercialize university inventions. Moreover, abstract knowledge advances per se elicit little or no response. Our findings question the belief that public science represents a non-rival public good that feeds into corporate R&D through knowledge spillovers.

JEL-codes: O3 (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-cse, nep-ino, nep-sbm and nep-tid
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